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Presentation Topic. “HIGH PE MULTIPLES STOCKS CAN BE PURCHASED IF PEG RATIO IS LOWER…!!”. P/E Ratio. The P/E ratio (price-to-earnings ratio) is a company’s share price divided by its earning per share. Calculated as:- Market value per share

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  1. Presentation Topic “HIGH PE MULTIPLES STOCKS CAN BE PURCHASED IF PEG RATIO IS LOWER…!!”

  2. P/E Ratio The P/E ratio (price-to-earnings ratio) is a company’s share price divided by its earning per share. Calculated as:- Market value per share Earning per share(EPS) The P/E of a company tells us how much investors are willing to pay, based on the earnings of the company.

  3. EPS • Earnings per share (EPS) are basically considered on the basis of net profit for the last four quarters. • Calculated as:- Net profit No. of Shares • The higher the gap between the price and the earnings, the higher the PE multiple.

  4. Stock Valuation By P/E Ratio • P/E ratio indicates an overvalued stock. But some shares with higher PE multiples may still be undervalued. • P/E ratio indicates an undervalued stock. But some at even low levels it may be overvalued. It all depends upon the company you are looking at. • To make sense of the P/E ratio, we need to look at growth rates and industry performance also.

  5. PEG RATIO • The PEG ratio is a valuation metric that compares a company’s price-earnings ratio with its projected growth rate. • The PEG ratio is calculated by dividing the P/E ratio by the firm’s earnings growth rate: PEG Ratio :- P/E Ratio Growth

  6. Stock Valuation By PEG Ratio • If the PEG =1, the company is considered fairly valued. • A PEG > 1, indicates an overvalued company • A PEG < 1, indicates an undervalued company.

  7. Evaluating Combination’s Of P/E and PEG • P/E and PEG indicate projected earning’s are low. • P/E and PEG indicate projected earning’s are high. • P/E and PEG indicate projected earning’s are low. • P/E and PEG indicate projected earning’s are high.

  8. Evaluating stock’s with Higher P/E multiple and Low PEG • Higher PEG signifies high market value of the stock. • Low PEG signifies high future growth of the company. • Thus lower the P/E ratio , the less investors pay for each unit of future earning growth ,so even if PEG of the stock is high projected earning growth may be a good value.

  9. Therefore, High PE Multiple stocks should be avoided but not always because there are some other factors also such as ”Growth” for high PE

  10. Any Questions?? THANK YOU!! Presented by: Madhulika Neelam Rekha Shweta Anand Ankush Lath OmPrakash

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